Archives of “January 26, 2019” day

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Speculation -Defination

  
  Education
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Speculation by definition requires some amount of loss otherwise the game is fixed. However, I believe loss can be broken down into avoidable loss and unavoidable loss. Unavoidable loss is, well, unavoidable. But in my personal experience (and based on pretty much all speculative loss I have seen or read about) all avoidable speculative loss is traced back to some core elements/violations: not being disciplined (many interpretations), getting emotional and all of the associated errors and mistakes that brings, sizing positions too big so that regardless of odds you eventually have to reach ruin, not being consistent in your approach (the switches), not managing your risk adequately either via position sizing or stop losses, finally you have to be patient for the right pitch whatever that may be for you. 

He was once probably the richest man. They were bringing in $1B a year in profits in 1978.

  
  Education
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During its heyday, Pablo Escobar’s drug cartel spent $2,500 per month on rubber bands for bricks of cash. Mental Floss has a interesting profile of the drug lord.

The profits were astronomical at every step. In 1978 each kilo probably cost Escobar $2,000 but sold to Lehder and Jung for $22,000, clearing Escobar $20,000 per kilo. In the next stage they transported an average of 400 kilos to south Florida (incurring some additional expenses in hush money for local airport authorities) where mid-level dealers paid a wholesale price of $60,000 per kilo; thus in 1978 each 400-kilo load earned Escobar $8 million and Lehder, Ochoa, and Jung $5 million each in profits. Of course the mid-level dealers did just fine: after cutting the drug with baking soda each shipment retailed on the street for $210 million, almost ten times what they paid for it.

Soon Lehder was hiring American pilots to fly a steady stream of cocaine into the U.S., paying them $400,000 per trip. At one trip per week, in 1978 this translated into wholesale revenues of $1.3 billion and profits of $1 billion.

Trading is Mental Game -5 points

  
  Education
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1.    A trader can only build confidence to take a real time trade entry after they have done the necessary homework in back testing through multiple market environments to know the probabilities of success and the possibilities of failure. Understanding how the markets have behaved with past price patterns can give the trader the boldness they need to push the submit button on their broker’s screen.

2.    Understanding the price level where your stop loss on a trade will be and also your potential price target will give you a good idea of the risk and reward dynamics of a trade set up. It is easier to trade when you know that you are risking $100 for a chance to make $300 and the odds are on your side with a great entry.

3.    Structuring your position sizing so that if your stop is hit you will only lose 1% of your total trading capital will eliminate much of your fear of failure. The urgency and importance of any one trade should be converted into the calm assurance of knowing that the current trade is just one of the next one hundred trades. You can overcome the majority of anxiety around trading when you simply trade small enough so that any one trade or a string of trades will not affect your long term trading success.

4.    Trading what you know and are familiar with is low stress trading. Trading a chart pattern, stock, or index that you have traded for years is familiar territory. Also trading markets inside your circle of competence creates confidence. Only trade futures, options, stocks, bonds, forex, and indexes that you understand. Many traders drown chasing unfamiliar waterfalls.

5.    A lot of performance confidence comes from having a detailed trading plan on what you will do before the market opens and the faith in yourself to execute that plan after the market opens. Knowing that your decisions will be based on the facts and the reality of price action and that you will not be swept away with emotions and ego while trading can allow you to rise above anxiety and instead operate with faith in yourself and your system

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